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Risk Workshop Session 1 Malcolm Leinster
Risk Workshop Session 1
Malcolm Leinster
Risk Workshop Team
• Ashfaque Chowdhury
• Olivia King-Strydom
• Matthew Le Lacheur
• Malcolm Leinster
• Kevin O’Malley
Workshop Outline
• Introduction
• What is risk?
–How can we evaluate it?
–Qualitative risk assessment
• Hazard identification and risk reduction
– Semi-quantitative risk assessment
• Quantitative risk assessment
– Examples of Quantitative risk assessment
What is Risk? • Effect of uncertainty on objectives (AS/NZS ISO 31000:2009)
– Doesn’t tell us much that we can apply
• Risk can be defined as the combination of the probability of an event and its consequences (ISO/IEC Guide 73)
• Probable consequences of an event – Risk = probability x consequences (ASME PCC-3-2007)
– Risk(t) = Probability(t) x Consequences(t)
– Often interpreted qualitatively according to a risk matrix structure
– Can be translated directly into meaningful terms such as financial, man-hours, energy units.
What is Risk?
• Risk is not all negative - there can be positive aspects (upside risk)
– Riding to work on a bicycle can result in accidents affecting the health of the rider
– [p(t) low, c(t) high]. Most of this downside risk can be managed
– Riding a bicycle can improve general health
– [p(t) high, c(t) high]
Where is Risk Applicable ?
• Everywhere!
– Everyone does it to some extent, all the time
• Banking
– Most banking relies on lending more money than there is backing, and anticipating that not everyone will call in their debts at once.
– Global financial crisis 2007 was a result of dishonesty and incompetence, leading to poor risk management
• Insurance
– Insurers strive to understand the nature and size of risks, and set their premiums high enough to make a profit
– Value of premiums = Value of risk + profit
Qualitative Risk Assessment – Probability 3 Level
(ASME PCC-3-2007 Risk Based Inspection)
Possible Qualitative Rank or Frequency
Annual Failure Probability
Low < 0.0001
Moderate 0.0001–0.01
High > 0.01
Qualitative Risk Assessment – Probability 6 Level
(ASME PCC-3-2007 Risk Based Inspection)
Possible Qualitative Rank or Frequency Annual Failure Probability
Remote < 0.00001
Very Low 0.00001–0.0001
Low 0.0001–0.001
Moderate 0.001–0.01
High 0.01–0.1
Very High > 0.1
Qualitative Risk Assessment – Consequences 3 Level
(ASME PCC-3-2007 Risk Based Inspection)
Category Safety Consequence
Health Consequence
Environmental Consequence
High Fatality or injury with permanent disability
Long-term health effects
Major off-site response and cleanup effort
Moderate Lost time injury with full recovery expected
Short-term health effect with full recovery expected
Minor off-site, but possible major on-site response
Low First aid only injury Minimal health impact
Minor on-site response
Qualitative Risk Assessment – Consequences 6 Level
(ASME PCC-3-2007 Risk Based Inspection)
Category Description Examples
I Catastrophic Large number of fatalities, and/or major long-term environmental impact.
II Major A few fatalities, and/or major short-term environmental impact.
III Serious Serious injuries, and/or significant environmental impact.
IV Significant Minor injuries, and/or short-term environmental impact.
V Minor First aid injuries only, and/or minimal environmental impact.
VI Insignificant No significant consequence
Qualitative Risk Assessment – Consequences 6 Level
(ASME PCC-3-2007 Risk Based Inspection)
Category Description Economic Loss Range
I Catastrophic ≥ $100,000,000
II Major ≥ $10,000,000 but < $100,000,000
III Serious ≥ $1,000,000 but < $10,000,000
IV Significant ≥ $100,000 but < $1,000,000
V Minor ≥ $10,000 but < $100,000
VI Insignificant < $10,000
ASME PCC-3-2007 Risk Based Inspection
Companion to AS/NZS 4360:2004
Qualitative Risk Categorisation
Qualitative Risk Analysis Matrix - Level of Risk after AS / NZS 4360:1995 Table D3
Insignificant Minor Moderate Major Catastrophic
Likelihood 1 2 3 4 5
5 Almost Certain S S H H H
4 Likely M S S H H
3 Moderate L M S H H
2 Unlikely L L M S H
1 Rare L L M S S
H high risk: Detailed research and management planning required at senior levels
S significant risk: Senior management attention needed
M moderate risk: Management responsibility must be specified
L low risk: Manage by routine procedures
Consequences
Qualitative Risk Assessment 6 x 6 Matrix with Quantitative Guide
from CQU Course Asset Management Systems
6 6 12 $2.5M 18 $5M 24 30 $50M 36 $100M
5 5 10 15 20 $5M 25 $20M 30 $50M
4 4 8 12 16 20 24
3 3 $100K 6 $1M 9 12 15 18
2 2 4 6 8 10 12
1 1 $0 2 3 4 5 6
1 2 3 4 5 6
Likelihood of occurrence (L)
Table 2.3: Typical 6 x 6 Risk Matrix (CR Webster & Associates, 2007)
Sev
erit
y (
S)
Summary of Qualitative Risk Assessment Techniques
• May be quick (sometimes)
• Very imprecise – output is not particularly useful
• Gives no real guidance on measures to treat risk
• Not suitable to evaluate combinations of risks
Questions ?
